Paul deLespinasse: A social dividend – a real way to reduce income inequality

Monday

Feb 18, 2013 at 1:00 PM

President Obama proposes increasing the minimum wage from $7.25 to $9. One can't quarrel with his goal — reducing income inequalities — but raising the minimum wage is a lousy way to do this. Here are some other ways.

President Obama proposes increasing the minimum wage from $7.25 to $9. One can't quarrel with his goal — reducing income inequalities — but raising the minimum wage is a lousy way to do this. When prices increase, the amount people buy decreases. A higher minimum benefits some but pushes others into unemployment with no wages, aggravating inequality.

The studies purporting to prove that a higher minimum doesn't increase unemployment — contradicting economic principles and common sense — cannot be taken seriously. It is true, though, that the proposed $9 minimum won't elevate unemployment in the state of Washington, where the minimum is already $9.19.

Laws attempting to raise wages above their natural level, the level at which there is full employment, tackle inequality in the wrong place. Instead, we should make wages a smaller portion of people's income by increasing their other income.

One way to do this would be to expand the Earned Income Tax Credit, a negative income tax in which the government sends money to supplement low wages. Michael Saltsman, at the Employment Policies Institute, calculates that the current EITC brings the effective hourly income of a single parent with two children working at a full time minimum wage job in New York up from $7.25 to $10.52. This doesn't increase unemployment.

An even better way to raise people's other income would be for government, acting as trustee for the public, to capture the full economic "rents" of all natural resources (land, air, water, oil, electromagnetic spectrum, etc.) and then distribute this money in a social dividend. The dividend would go to everyone equally; no one person has a greater claim on natural resource value than anyone else, since it is not the product of anyone's labor. The Alaskan dividend, based on oil alone, suggests that payments could be substantial.

A social dividend would reduce inequality since adding an equality (the dividend) to an inequality (wages) produces less inequality. The dividend would be particularly important to people with very low wages or who are unemployed.

Just as our society sometimes overprices labor, it underprices natural resources. Industries dump pollutants into air and water, and ranchers lease federal lands, without paying the natural price for these privileges. Broadcasters and cell phone companies don't pay the full natural price for using electromagnetic spectrum. The social dividend would increase public support for charging market rents to those using natural resources. The higher the price for using natural resources, the more the dividend and the greater the reduction in inequality. Wages would become a less important part of people's income and pollution, becoming more expensive, would decrease.

In quasi-Marxist terms a social dividend makes everyone co-owners of natural resources and hence members of the bourgeoisie, leaving the proletariat (people owning no property) without any members. We thus have a classless society, but a capitalistic one with free enterprise, decentralized decision-making and economic markets.

Republicans wrongly accuse President Obama, who just proposes increasing the minimum wage, of being too radical. Substantially reducing income inequality requires a more radical approach than we have heard so far from this president.

Paul F. deLespinasse, who now lives in Oregon, is professor emeritus of political science at Adrian College. His book, "The Metaconstitutional Manifesto: A Bourgeois Vision of the Classless Society," discusses the possibilities of a social dividend more fully and can be read without charge at www.deLespinasse.org.